Pound Australian dollar (GBP/AUD) exchange rate listless ahead of BoE decision
The pound Australian dollar (GBP/AUD) exchange rate is rangebound this morning, as markets await the Bank of England’s (BoE) interest rate decision.
At the time of writing, GBP/AUD is trading at around AU$1.9053, showing little movement from today’s opening rates.
Pound (GBP) muted ahead of BoE decision
The pound (GBP) is trading in a quiet manner this morning, as markets anticipate the Bank of England’s interest rate decision.
This afternoon, the central bank is widely expected to leave interest rates unchanged at 5.25%< maintaining a record high. This would likely mark the seventh consecutive meeting where rates have remained the same.
However, service inflation remains persistent. Yesterday’s UK inflation data revealed that although headline inflation had cooled to 2%, the BoE’s target rate, service inflation remained above forecasts.
This has essentially nailed-on no change in rates today in investors’ minds, which could be underpinning GBP.
However, as the BoE is on a blackout period ahead of the UK general election, any forward guidance may be light in content.
If the BoE began to lay the groundwork for a rate cut at its next meeting in the minutes, GBP could slump.
Australian dollar (AUD) flat amid lack of data
The Australian dollar (AUD) is trading in a muted capacity this morning, due to a lack of impactful domestic data.
This is leaving the acutely risk-sensitive currently exposed to the market mood, which appears mixed. With this in mind, AUD appears unable to attract impactful support from investors.
However, continued bets on hawkish action from the Reserve Bank of Australia (RBA) may be underpinning the ‘Aussie’.
As the central bank recently left the door open to further interest rate hikes at its recent decision, AUD is remaining afloat. Inflation is proving to be more persistent than the central bank expected, and it has elected to keep all options on the table.
Additionally, the RBA has stated that it had not even considered cutting interest rates. It stated:
‘The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out. The Board will rely upon the data and the evolving assessment of risks.’
Pound Australian dollar exchange rate forecast: UK retail sales in focus
Looking ahead for the pound, the core catalyst of movement is likely to be the latest UK retail sales data.
Due tomorrow, retail sales in May are expected to have increased by 1.5%. This could strengthen the pound by indicating robust consumer spending.
This is followed by the latest UK preliminary PMIs, which reflect private sector activity in June. Both manufacturing and service sector indexes are expected to have risen, which could lift Sterling by showing growth.
For the Australian dollar, the latest preliminary PMIs are also due for publication. While the service sector is expected to have expanded slightly, the manufacturing index is expected to reflect slowing activity.
This could prompt volatile trade for the ‘Aussie’ due to displaying mixed economic output.